Law on Public Procurements one year later - is there any progress?

The statement by Dušan Đorđević that quarter of public procurements in Serbia are conducted without the announcement of public call has only confirmed the doubts of businessmen in what all of them already know, but rarely anybody speaks about.

The process of public procurements in Serbia was regulated by the Law for the first time in 2002. Those regulations were partially changed with the Law on Public Procurements that was passed on December 20, 2008. The application of that law started in early 2009.

According to the data from the first half of year 2009, which are provided by the Administration for Public Procurements, about 250,000 public procurements worth 4bn EUR are conducted in Serbia every year.

According to the Ministry of Finance's estimates, the value of Serbia's gross national product in 2009 amounted to 2,953bn RSD or about 31.5bn EUR. That means that Serbia sets aside about 13% of GNP for public procurements.

The effects of the law one year after its application commenced and the flaws and problems of its application are the crucial issues discussed at panel discussion "Law on Public Procurements - Transparency, Efficiency and Competitiveness", which was organized today (April 15, 2010) by Law firm Janković, Popović & Mitić.

In addition to numerous lawyers, the panel discussion also gathered the representatives of authorized government institutions and public and private companies that have the role of purchaser or bidder in the process of public procurements.

Transparency, competitiveness, efficiency

One of the innovations in the Law is launching of the Public Procurement Portal, which should ensure greater transparency of the procedure, and efficiency, competitiveness and transparency are the basic principles of the whole process.

Đorđe Novčić, a lawyer from law firm Janković, Popović & Mitić whose specialty is commercial law, pointed out, however, that the portal was not sufficiently easy to browse and that he, as its standard visitor, found it difficult to find the necessary data on the portal.

The adviser of the Administration for Public Procurements, Saša Varinac, agreed that the portal was not efficient enough and said that was the consequence of use of inappropriate equipment and staff.

- The new Law has significantly improved the system of public procurements, which is also underlined by the European Commission in their reports, but there is still the problem of sanctions. Namely, we do not have a developed mechanism to sanction those who violate that Law - said Varinac.

- The State Auditor can help only to a certain extent, but the Commission for Protection of Rights in Public Procurement Procedures would be even better solution. Members of that commission have not yet been appointed by the Parliament and it has not yet obtained the status of independent institution - Varinac explained.

- Therefore it is impossible to talk about how efficient the Law is until the institutions responsible for its application start operating at full capacity – Varinac added.

Who writes public calls?

Efficiently conducted procurement implies not only the lowest price achieved for the required goods or services, but also the time for its realization, as well as many other circumstances that can be found in the contract.

- The practice of writing public calls is still underdeveloped in Serbia. The rules of participation are often not clearly defined, which companies bidders can make the advantage of. That is why public institutions must take more care of that because they always get what they ask for – says the adviser of the Republic Administration for Public Procurements.

- All public procurements must be included in the annual business plan and part of the budget of a company or an institution must be set aside for them. Thus, it remains unclear how it is possible to spend more money than planned on public procurements - lawyer Novčić remarked.

Ilija Tripković, the Director of Health Center Valjevo, which serves about 200,000 people in the Kolubara region, said that, in addition to the budget funds of 2.3bn RSD, they had also spent the money from the loans and donations, realized by foreign institutions through the Ministry of Health, on some significant procurements. That budget amounts to about 1bn EUR and most procurements have been conducted by the USAID.

However, according to Tripković, the whole procedure in that case is under the authority of these institutions and the Health Center can not take part in selection of the model of required equipment. The problem emerges when that equipment needs to be serviced because the tender winners in these procedures are usually the companies that are not present in the market of Serbia.

In order to cut the costs, people in the Health Center have tried to "outsource" part of the obligations (laundry, transportation of patients) to private companies, but these services then cost them three times more.

And what do the bidders say?

Aleksandar Babas, CEO of Fresenius Medical Care, the biggest manufacturer of dialysis equipment, is of the opinion that the transparency in the process of public procurements must be viewed in a broader context and that there will be no transparent procurements as long as social relations are not transparent.

Particularly disputable, in Babac's opinion, is Article 10 of the new Law, which stipulates that the bidder can get the information on the process and competitors exclusively at the public opening of the bids. As Babac pointed out, the problem also lies in the fact that, on that occasion, insight is allowed only in the data included in the minutes (bidder's name, bid amount...), while the information on whether the "competitor" meets all the tender conditions, which is necessary for a procedure to be transparent, remains unavailable.

Babac also said he did not understand why there were no different terms for realization of procurements in Serbia, ranked by the amount of required financial means for each of them.

- You can not apply the same terms to the procurement of a pen and the procurement of highway construction works – Babac concluded.

J.Đ